Portugal finance minister resigns, cites need for 'cohesion'

LISBON Mon Jul 1, 2013 6:47pm BST

1 of 2. Portugal's Finance Minister Vitor Gaspar reacts during his news briefing on the latest bailout review in Lisbon March 15, 2013.

Credit: Reuters/Hugo Correia

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LISBON (Reuters) - Portugal's Finance Minister Vitor Gaspar, the architect of the country's EU/IMF bailout plan who was praised by Lisbon's lenders, has resigned and will be replaced by the country's treasury secretary, the president's office said on Monday.

Gaspar's departure marks the biggest political casualty from the country's debt crisis since the previous Socialist government collapsed in the spring of 2011 after it was forced to request the bailout. The centre-right Social Democrats have governed since then in a coalition with the rightist CDS.

His departure comes shortly before the next review of the country's bailout by its creditors, the European Union and IMF, to start on July 15.

Gaspar, who has been widely blamed by the Portuguese for the deep austerity that has ravaged the country under the bailout, said in a resignation letter that he quit due to the growing erosion of public support for the adjustment plan.

"The risks and challenges in coming times are enormous," he said in the letter addressed to the prime minister. "They demand cohesion in government. It is my firm conviction that my departure will contribute to reinforce your leadership and the cohesion of the government."

Portugal entered its third year of recession in 2013 under the weight of deeply unpopular austerity which has undermined salaries, cut into welfare benefits and raised taxes sharply. Unemployment is at record highs of nearly 18 percent.

Gaspar will be replaced by Treasury Secretary Maria Luis de Albuquerque, who helped engineer Portugal's successful return to bond markets earlier this year.

Filipe Garcia, head of consultancy Informacao de Mercados Financeiros, said the choice of Albuquerque was a sign of continuity.

"In terms of external projection this is a bet on continuity, a way of minimising the damage done by the departure of a minister who pleased international partners," said Garcia.

Gaspar had faced periodic criticism from the junior partner in the country's centre-right coalition government, including over the biggest tax hikes in living memory that were launched this year to meet the goals of the 78-billion-euro (67 billion pounds) bailout.

Albuquerque recently led a complex process to renegotiate high-risk derivatives contracts sold to Portuguese state firms by banks which had amounted to potential losses of around 3 billion. The state has managed to reduce its liabilities, but has revealed little concrete data.

At the last review of Portugal by creditors, the country won an easing of tough budget goals and Prime Minister Pedro Passos Coelho has suggested he may request a fresh relaxation for next year if the economic outlook worsens.

(Writing By Axel Bugge, additional reporting by Sergio Goncalves, editing by Andrei Khalip, Ron Askew)

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